Jefferies Financial Group Inc. (JEF) Stock Analysis and Metrics

Sector: Financial Services Industry: Capital Markets CIK: 0000096223

Market Cap 13.30 Bn

P/B 1.27

P/E 20.58

P/S 1.84

ROIC (Qtr) 1.24

Div Yield % 3.15

Rev 1y % (Qtr) 21.61

Total Debt (Qtr) 44.98 Bn

Debt/Equity (Qtr) 4.31

About

Jefferies Financial Group Inc., commonly known as Jefferies, operates as a global full-service investment banking and capital markets firm in various countries, including the United States, the United Kingdom, and Hong Kong. Established in 1962, the company has built a reputation for providing a wide range of financial services to its clients, such as investment banking, equities, fixed income, and asset management. Jefferies operates in two primary business segments: Investment Banking and Capital Markets and Asset Management. The Investment Banking...

Jefferies Financial Group Inc., commonly known as Jefferies, operates as a global full-service investment banking and capital markets firm in various countries, including the United States, the United Kingdom, and Hong Kong. Established in 1962, the company has built a reputation for providing a wide range of financial services to its clients, such as investment banking, equities, fixed income, and asset management.

Jefferies operates in two primary business segments: Investment Banking and Capital Markets and Asset Management. The Investment Banking and Capital Markets segment is responsible for generating a significant portion of the company's revenue. This segment offers investment banking, equities, and fixed income services to its clients. The investment banking division provides advisory and underwriting services in various industries, including mergers and acquisitions, debt and equity financings, and restructuring. The equities business is a significant contributor to the company's revenue, focusing on cash equities, electronic trading, equity derivatives, and convertibles. Moreover, the fixed income platform provides clients with distinctive solutions, service, and execution across a range of fixed income products, including investment grade, high-yield, and distressed debt securities.

On the other hand, the Asset Management segment offers a range of alternative investment strategies to institutional clients, including multi-manager products, niche equity long/short strategies, and credit strategies. Additionally, Jefferies' merchant banking portfolio comprises investments in private companies and asset management funds.

Jefferies competes with large global bank holding companies, broker-dealers, asset managers, and boutique firms. The company's competitiveness is attributed to its ability to provide differentiated insights to clients, attract and retain skilled professionals, deliver a competitive breadth of high-quality service offerings, and maintain a flat, nimble, and entrepreneurial culture.

The company's workforce comprises over 7,500 employees globally, with a significant presence in the Americas, Europe, and Asia-Pacific. Jefferies is committed to attracting, retaining, and developing talented professionals and has implemented various initiatives to promote diversity, equity, and inclusion in the workplace.

Jefferies operates in an industry subject to extensive regulation in the United States, including oversight by the Securities and Exchange Commission (SEC). Additionally, the company is subject to various international regulations and standards related to anti-money laundering, sanctions, and market conduct.

Price action

Investment thesis

Bull case

Operating cash flow of (1.75B) provides exceptional 53.09x coverage of minority interest expenses (32.95M), showing strong core operations.
Strong free cash flow of (1.97B) provides 15.93x coverage of acquisition spending (123.74M), indicating disciplined M&A strategy.
Free cash flow of (1.97B) provides excellent 5.44x coverage of dividends (362.16M), indicating sustainable shareholder returns.
Retained earnings of 8.46B represent substantial 0.81x of equity 10.44B, indicating strong internal capital generation.
Retained earnings of 8.46B provide strong 4.60x coverage of intangibles 1.84B, indicating quality earnings retention.

Bear case

Cash reserves of 12.57B provide limited coverage of acquisition spending of (123.74M), which is -101.58x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
The company's operating cash flow of (1.75B) shows concerning coverage of stock compensation expenses of 82.98M, with a -21.09 ratio indicating potential earnings quality issues.
Free cash flow of (1.97B) provides weak coverage of capital expenditures of 221.35M, with a -8.90 ratio suggesting additional external financing needs for growth initiatives.
Operating cash flow of (1.75B) provides minimal -7.50x coverage of tax expenses of 233.15M, suggesting potential tax planning inefficiencies or unsustainable tax positions.
Operating cash flow of (1.75B) barely covers operating expenses of 765.11M with a -2.29 ratio, suggesting thin operational efficiency margins and limited flexibility.

Peer comparison

Companies in the Capital Markets

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	GS	Goldman Sachs Group Inc	284.23 Bn	17.94	4.84	911.32 Bn
2	MS	Morgan Stanley	279.63 Bn	17.97	4.05	353.12 Bn
3	SCHW	Schwab Charles Corp	179.33 Bn	23.09	7.83	27.59 Bn
4	HOOD	Robinhood Markets, Inc.	106.92 Bn	48.73	25.43	0.00 Bn
5	CRCL	Circle Internet Group, Inc.	40.97 Bn	261.00	24.22	0.15 Bn
6	IBKR	Interactive Brokers Group, Inc.	28.23 Bn	30.79	4.75	28.43 Bn
7	LPLA	LPL Financial Holdings Inc.	27.60 Bn	33.13	1.77	7.52 Bn
8	FUTU	Futu Holdings Ltd	22.89 Bn	18.13	8.54	1.75 Bn

Industry comparisons

Current Valuation	Value	Ind Avg
EV to Assets EV to Assets	0.65	1.07
EV to Cash from Ops. EV/CFO	-25.69	15.33
EV to Debt EV to Debt	1.00	21.89
EV to EBIT EV/EBIT	46.79	-0.80
EV to EBITDA EV/EBITDA	40.01	11.20
EV to Free Cash Flow [EV/FCF] EV/FCF	-22.80	43.08
EV to Market Cap EV to Market Cap	3.38	-0.05
EV to Revenue EV/Rev	6.22	12.82
Price to Book Value [P/B] P/B	1.27	3.09
Price to Earnings [P/E] P/E	20.58	6.20

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Div Coverage (Qtr)	1.46	4.22
Dividend Payout Ratio % Div Payout % (Qtr)	51.50	10.37
Dividend per Basic Share Div per Share (Qtr)	1.55	0.70
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	-16.93	-8.68
Interest Coverage Int. cover (Qtr)	0.00	37.53

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex 1y % (Qtr)	-117.87	-12,429.64
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	5.33	1,588.78
Dividend Growth (1y) % Div 1y % (Qtr)	24.00	4.88
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	24.77	270.93
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	17.25	333.57
EBIT Growth (1y) % EBIT 1y % (Qtr)	19.04	3,103.22
EBT Growth (1y) % EBT 1y % (Qtr)	19.04	3,039.53
EPS Growth (1y) % EPS 1y % (Qtr)	24.90	24.25
FCF Growth (1y) % FCF 1y % (Qtr)	4.51	-80.08
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	14.35	51.33

Liquidity Ratios	Value	Ind Avg
Asset Utilization Ratio Asset Util Ratio (Qtr)	0.10	0.42
Cash Payout Ratio Cash Payout (Qtr)	-0.23	-0.08
Cash Ratio Cash Ratio (Qtr)	0.00	2.01
Current Ratio Curr Ratio (Qtr)	0.00	3.47
Debt to Equity Ratio Debt/Equity (Qtr)	4.31	1.46
Interest Cover Ratio Int Coverage (Qtr)	0.00	37.53
Times Interest Earned Times Interest Earned (Qtr)	0.00	37.53

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	16.10	76.68
EBIT Margin % EBIT Margin % (Qtr)	13.29	46.81
EBT Margin % EBT Margin % (Qtr)	13.29	58.57
Gross Margin % Gross Margin % (Qtr)	90.50	53.60
Net Profit Margin % Net Margin % (Qtr)	8.90	29.41

Jefferies Financial Group Inc. (NYSE: JEF)

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